Lake Shore Gold* (LSG : TSX : $2.16), Net Change: -0.70, % Change: -24.48%, Volume: 17,229,393
Still Beached. Lake Shore Gold continued to sell-off after releasing disappointing Q2/11 production results on Tuesday.
Quarterly production came in at 17,615 ounces of gold versus expectations for 31,800 ounces. The shortfall was caused by
development delays at the Timmins mine, resulting in the use of lower grade sources and a head grade 60% lower than
budgeted. Additionally, the company said grades during Q2 were adversely affected by the milling of low-grade stockpiles from
Bell Creek Mine, which had been accumulated as part of the advanced exploration program at the project. Mill throughput
averaged 1,790 tonnes per day in the Q2, compared with the company's expectations of average throughput of 2,000-2,100
tonnes per day. Worse yet, Lake Shore also expects cash operating costs for the Q2 to be sequentially higher due to lower
grades and production levels (cash operating costs from the Timmins mine was $586 per ounce in the first quarter of
commercial operation). The company suggests ore from the higher-grade UM1 zone will be mined in H2/11, but has reduced its
2011 production forecast from 125,000 oz Au to 85,000-100,000 ounces. Further, Lake Shore indicated that the Timmins mine
orebody is broader than they previously understood. According to the company, “This will affect our average grades in 2011 as
we mine more tonnes at lower grades, but in the longer term it may result in more overall ounces, although further work is
required to confirm this.” At least five analysts downgraded Lake Shore on Wednesday. |
